What Is the Effect on the Accounting Equation When a Company

question 16

Multiple Choice

What is the effect on the accounting equation when a company recognizes rent as earned that had previously been received in advance from customers?

• A)Expenses increase
• B)Revenues decrease
• C)Liabilities increase
• D)Net income increases

---

Definitions:

Acquisition Cost

The net cash equivalent amount paid or to be paid for an asset

Residual Value

Residual value is the estimated value of a fixed asset at the end of its useful life, reflecting what it can be sold for or its salvage value.

Financial Reporting

The process of producing statements that disclose an organization's financial status to management, investors, and government entities.

GAAP

Generally Accepted Accounting Principles (GAAP) are a set of rules and standards used in the United States for financial reporting, providing guidelines on how financial statements should be prepared and disclosed.